GMA WANTS DEBT TO GDP CUT TO 50% BY 2010 FROM LAST YEAR'S 72%
MANILA, March 22, 2006 (MALAYA) By REGINA BENGCO and GENIVI FACTAO - President Arroyo yesterday said she wants the country’s debt to GDP (gross domestic product) ratio cut to 50 percent by 2010 from last year’s 72 percent.
The government was able to improve last year’s ratio, which was the worst among all the" B-" junk-rated sovereigns, due to improved tax collections due to the higher sales tax and the strengthening of the peso against the dollar.
Last year’s debt to GDP ratio was an improvement from 79 percent in 2004.
Finance secretary Margarito Teves also said yesterday that the government will rejig the borrowing mix , hiking local borrowing to as high as 65 percent from an earlier mix ratio of 58 percent.
Teves said it would be cheaper for the government to borrow locally .
Deputy national treasurer Christine Sanchez, noted that local interest rate had dropped by half from 10 percent to 5 per cent.
Arroyo, in a roundtable discussion with finance and treasury officials, was informed that debt to GDP ratio went down because economic growth was faster than the growth in national debt.
Teves said he expects the debt to GDP ratio to be cut to 68 percent once the P125-billion target deficit for 2006 is attained.
"I want it halved when my term ends because that is what has been happening to our neighboring countries," Arroyo said.
Sanchez noted the strengthening of the peso from P56 to P51 to the dollar contributed a great deal in the reduction of debt to GDP ratio.
Arroyo said government has to spend a lot on infrastructure in order to raise the growth rate even more. She recalled that the national budget before used to be spent mostly on salaries, internal revenue allotment, and debt interest payments.
Arroyo said the credit rating agencies are looking at the reform laws and their implementation and that the current economic picture is good.
Teves said the P1.3-trillion proposed 2006 national budget should be passed by Congress soon so that infrastructure and other pump-priming projects could be funded.
But he said government could only give a P1,000 monthly increase for government employees, adding that the total amount would already cost P13.1 billion. He said the additional P1,000 that workers are asking for could be given next year if the economy improves.
The domestic borrowing ceiling was set at P310 billion, while total foreign is placed at $4 billion.
Part of the borrowings will be allocated for the social services and infrastructure like construction of South Luzon expressway, water supply, and power.
"If infrastructure projects will be made, we can compete with Asia and the ASEAN," Teves said.
Of the P125 billion deficit, P800 million will be sourced from Official Development Assistance while P445 million from commercial borrowings.
Chief News Editor: Sol Jose Vanzi
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